Introduction (delete this heading in your final paper) [In your opening paragrap
ID: 2542360 • Letter: I
Question
Introduction (delete this heading in your final paper) [In your opening paragraph, very briefly introduce the purpose of your paper. Recall that you will be discussing the accounting cycle in keeping with the key terms of steps, outputs, and importance, as explained in your rubric instructions. Three or four sentences will be sufficient.1 Paragraph One (delete this heading in your final paper) [Using your textbook and other provided course resources, identify the steps of the accounting cycle. Provide a description of each step in your own words, using specific examples.] Paragraph Two (delete this heading in your final paper) [Identify and describe the major products of the accounting cycle. Why are they important? Explain the purpose of each financial statement, including how they are interrelated A minimum of five to six sentences is required to support your thoughts. Be specific in your answer and use examples to support your thoughts.] Paragraph Three (delete this heading in your final paper) [Defend the importance of the accounting cycle to a business. Specifically, Discuss why specific steps are necessary Include in your discussion at least three different steps. A minimum of five to six sentences is required to support your thoughts. Focus your thoughts on the role of each step, as discussed in the second paragraph, and what each step contributes to the overall accounting process.]Explanation / Answer
Introduction:
Accounting cycle is the collective process of identification of financial transactions, recording of these transactions and preparation and presentation of financial statements. The accounting cycle process encompass number of steps which must be followed in order to provide expected output to an organization using these accounting cycle. The importance of accounting cycle to an organization is that it will help the organization to maintain its books of accounts efficiently and allow it to report its financial performance and position correctly in the financial statements of the organization.
Paragraph 1:
The accounting cycles as already mentioned earlier encompasses number of steps. These must be followed by an organization to achieve the desired outcomes from use of accounting cycle. The steps are as following:
Identification of transactions: Identification of transactions is essential to record these correctly.
Record journal entries: Subsequent to identification of financial transactions it is important to properly record these transactions in the journal book of relevant organization.
Post ledger entries: After journalizing the transactions the entries are posted in the ledger accounts to ascertain the balances of various accounts.
Unadjusted trial balance: From the balances of different ledger accounts the unadjusted trial balance is prepared.
Adjusted entries: Adjusted entries are those which are of unique characteristics. These are to be recorded correctly to prepare the adjusted trial balance.
Adjusted trial balance: Adjusted trial balance is prepared after taking into consideration the adjusted entries. The adjusted trial balance is the basis which is used to prepare the financial statements of an organization.
Financial statements: Financial statements include profit and loss account, Balance sheet, Cash flow statement, Statement of changes in equity and notes to accounts. These are used to assess the financial performance and position of an organization as on a particular date.
Paragraph 2:
The major products of accounting cycles are the profit and loss account statement, statement of financial position, cash flow statement, statement of changes in equity and notes to accounts. The importance of these products are explained below:
Profit and loss account: The profit and loss account statement discloses the financial performance of an organization for a period.
Balance sheet: The statement of financial position discloses the financial position of an organization as on a particular date.
Cash flow statement: Cash flow statement provides information about the cash flow transactions of an organization and its cash position.
Statement of changes in equity: This statement discloses the changes in shareholders’ equity in an organization.
Notes to accounts: The notes to accounts contain important notes relevant to the overall accounts and financial statements.
Paragraph 3:
Each step of account cycle is important to the overall process as each step contributes to the preparation and presentation of financial statements properly to disclose the financial performance and financial position of an organization as on a particular date. The identification of financial transactions will help an organization to record these transactions in the journal book of the organization. The entries of journal book will be helpful to post these into ledgers. Using the ledger balances the unadjusted trial balance is to be prepared. Later the adjustment entries shall be recorded to prepare adjusted trail balance which shall be used to prepare the financial statements of the organization. Thus, each step is related to the completion of the subsequent step hence, the whole purpose of the financial reporting will be defeated if any of the step is not followed.
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